|Dow||+13.51 to 18,312.39|
|S&P 500||-1.37 to 2,127.82|
|Nasdaq||-8.41 to 5,070.03|
|10-YR Yield||+0.034 to 2.262%|
|Gold||-$20.30 to $1,207.30|
|Crude Oil||-$2.17 to $57.26|
I keep in shape by biking at least three, and as many as five, days a week. I’m not training for metric century rides anymore. And I’m certainly not pedaling fast enough to qualify for the Tour de France! But I find it works for me, even if I have to add a run or two in every now and then to mix things up.
One thing I always find fascinating is how much change people apparently chuck out their windows, or otherwise leave behind. Piles of pennies. Scuffed up nickels, dimes and even quarters. They’re all there for the taking in the side-of-the-road bike lines, and at almost every single intersection I have to stop at.
And you know what? I make a point of picking that change up, tucking it into my jersey pocket, and putting it in a money jar when I get home.
Some of that is because my parents raised me right, teaching me to appreciate the value of savings. But the rest is because it’s “found money!” No strings attached cash. If you get an opportunity to build wealth from other people’s castoffs, you’d be foolish not to take advantage of it.
|Energy Transfer Partners started with “found money.”|
All of that came to mind when I read this Bloomberg profile of Kelcy Warren, CEO of the oil and gas pipeline company Energy Transfer Partners (ETP, Weiss Ratings: C+).
Here’s a guy who is worth an estimated $7.3 billion. He lives in a 23,000-square-foot house on 10 acres outside of Dallas, Texas, and owns property elsewhere in Texas, Colorado, Lake Tahoe and Honduras. Oh, and he co-founded a music label for the heck of it.
But he wasn’t born with a silver spoon in his mouth, according to Bloomberg. He grew up in a town with 1,903 people in it, flunked out of a traditional college after one year, and then had to sweat his tail off working on pipelines under construction while attending night classes.
|“If you can build wealth from other people’s castoffs, you’d be foolish not to take advantage.”|
Then, he started taking advantage of “found money.” A pipeline company called Endevco went broke after an ill-advised refinery acquisition. But rather than take it as a sign of the apocalypse or hide under a rock, he and a buddy bought it up in bankruptcy. Two years later, they sold it – and Warren pocketed $13 million!
Years later, the giant energy firm Enron collapsed. That caused another round of panic in the energy patch, and a bunch of apocalyptic worries on Wall Street. But Warren took advantage of all the “found money” that panic created, and bulked up and expanded his pipeline company’s network on the cheap.
Now he’s sitting atop a company with a market capitalization of $28.6 billion, annual revenue of $51 billion, and more than 25,600 employees. That compares with $5.4 billion, $8.1 billion and 1,150 a half-decade ago.
And unlike the “sky is falling” crowd on Wall Street you’ve been hearing from on CNBC, Warren is ready to take advantage of all the “found money” created by the latest energy downturn again! His view: “The weak and the wounded will be vulnerable … We’ll be there.”
I’m not sharing this story because I think you need to rush out and buy ETP the instant you finish reading it. Timing, pricing and other factors are incredibly important when you buy any energy stock.
But I do believe the sector is brimming with “found money” opportunities. Other people’s castoffs that you can scoop up on the cheap – and build your wealth just like Warren built his! That’s why I put together a time-sensitive, detailed blueprint for you. It explains why I believe this is the greatest energy market opportunity in three decades, and what you can do about it.
In the meantime, what do you think about Kelcy Warren? Is his strategy for building ETP into an energy pipeline and processing giant working? Would you do things differently, and if so, why and how? Please do share your thoughts over at the Money and Markets website when you get a chance!
|Our Readers Speak|
Why doesn’t Main Street seem to care about the marginal new high in stocks? What is holding investors back from getting more excited about the move? Several investors weighed in on that over the past 24 hours.
Reader Lee S. doesn’t think the rally is much to celebrate, given how long in coming it has been. His comments: “A joyless rally? What rally? The market is so far behind where it is ‘supposed to be’ that we’re still in a generational bear market.
“If someone came back in a time machine and told you in 2000 that the Nasdaq would be at the same level in 15 years as it is today, the word ‘rally’ wouldn’t come close to what you were thinking. Fact is, it’s taken 15 years just to break even!”
“Remember the famous quote saying: ‘Stock gains average about 6%-7% per year through thick and thin?’ Well, if the S&P had gained 7% per year since 2000, it would be at 4213 — not the 2129 it is today. I’m 100% invested, but will be the first to admit that the market has been a terrible place to be in the past 15 years.”
Reader Steve H. put some of the blame on demographics, saying: “Maybe lack of general public participation in stocks is due to Baby Boomers retiring and not wanting to risk what they spent a lifetime accumulating.
“My retirement date was December 2009, and in March 2007, I took everything out of the market. The trigger for me was everyone I knew was buying properties on both coasts and selling only a few months later for big gains.
“A good friend who is a mortgage broker was talking about more business than he could handle because of no doc loans (NINJA, no income, no job, apply). I had no inkling of a housing bubble, but knew if the market took a breather there was not enough time line for me to sleep easy into retirement waiting for any event to smooth over.”
Finally, Reader Tradewinds blamed the artificial nature of the rally and worries about yet another crash down the road. The comments:
“It’s a synthetic market (contrived by the government, the Fed, and the big banks). It’s a market looking to fleece the little guy, who isn’t smart enough or crafty enough to survive in. Plus, it’s a time when our own government is becoming more and more predatory, especially against Main Street. And it’s a time when the hard down phase of the K-winter is about to take place.”
These are great insights, and I appreciate you sharing them. And I trust that you’ll agree, my firm and I have had absolutely no qualms about calling out coming crashes when and if we see them. We did it before the dot-bomb implosion, and I was probably the most vocal, aggressive analyst out there warning of the housing collapse in the mid-2000s.
But more recently, and really for the past couple of years, I’ve been recommending opportunistic investments … in select, highly rated stocks and sectors … with generous dividend yields, attractive fundamentals, or specific positive catalysts. And even more recently, I’ve been aggressively legging into the most beaten-down, bruised assets around – things like energy and emerging market stocks.
I believe it underscores the need to be opportunistic, and to not just hide all in cash. If you do that, your wealth will just be steadily eroded by inflation or other forms of confiscation, and you’ll miss out on the kinds of “found money” ideas.
By all means, let me know if you disagree, agree, or have other thoughts on this issue. The place to do so is the same as always: The website you can access here!
|Other Developments of the Day|
Housing starts had one heck of a rebound last month, jumping 20.2 percent to a seasonally adjusted annual rate of 1.14 million. That was the biggest monthly rise since February 1991, and it left starts at their highest level since November 2007. Permit issuance rose to 1.14 million, the highest in almost seven years.
Texas officials charged 170 bikers from the rival Bandidos and Cossacks gangs with various offenses related to the weekend fight and shoot out in Waco, Texas. Nine died and 18 were wounded in the massive brawl, which broke out at a meeting that had been called to discuss issues facing bikers regardless of their affiliation.
Wal-Mart Stores (WMT, Weiss Ratings: B) buckled under the pressure of higher wages and a higher U.S. dollar in the most recent quarter. Earnings excluding extraordinary items dropped 7 percent to $3.34 billion, or $1.03 per share, missing analyst estimates by two cents.
Results were somewhat more encouraging at Home Depot (HD, Weiss Ratings: A). Earnings came in at $1.58 billion, or $1.21 a share, in the most recent quarter. Adjusted profit slightly topped estimates, and the home improvement retailer forecast better-than-expected sales and profits for the full year.
But by the end of the day, both retailing stocks rolled over. Wal-Mart sank to a six-month low, while Home Depot gave up early gains and closed down almost 2 percent.
Finally, global money managers just cut their exposure to U.S. stocks to the lowest level in more than seven years, according to the latest Bank of America Merrill Lynch fund manager survey. The May survey also found that only 13 percent of polled investors felt oil was cheap.
The contrarian in me says this proves the run in energy is far from over. It also confirms the euphoria that accompanied past breakouts in the major averages is missing. From a contrarian standpoint, does that also mean the stock rally could go further? Share your opinion on that topic, or any other, over at the website.
Until next time,